UNA Gilligan and Others v Faxgore Ltd ((in Liquidation))
| Jurisdiction | Ireland |
| Judge | Ms. Justice Stack |
| Judgment Date | 24 September 2021 |
| Neutral Citation | [2021] IEHC 605 |
| Docket Number | [Record No. 2020/313 COS] |
| Court | High Court |
In the Matter of Spencer Dock Development Company Limited (In Liquidation)
and
In the Matter of the Companies Act, 1963 to 2012
and
In the Matter of Section 678 of the Companies Act, 2014
In the Matter of Spencer Dock Development Company Limited (In Liquidation)
and
In the Matter of the Companies Act, 1963 to 2012
and
In the Matter of Section 678 of the Companies Act, 2014
[2021] IEHC 605
[Record No. 2020/313 COS]
[Record No. 2020/314 COS]
THE HIGH COURT
JUDGMENT of Ms. Justice Stack delivered on the 24th day of September 2021.
These are applications pursuant to s. 678 of the Companies Act, 2014 for leave to issue proceedings against the respondents (“the Companies”), which are both in liquidation. A separate application was issued in respect of each Company, but the applications were heard together on the basis of a single set of written submissions and this judgment applies to both.
The proceedings are somewhat unusual in that there are 832 intended plaintiffs, the applicants in this application, comprising the owners of 616 apartments in the Spencer Dock Development (the Development) which was developed by Spencer Dock Development Company Limited (in liquidation) (“SDDC”). Faxgore Limited (in liquidation) (“Faxgore”) was a subsidiary of SDDC and it procured certification for the construction of the Development.
It is alleged that there are significant design and construction defects, relating mainly to the quality of windows and doors, and the related vents and sealing. The proceedings are instituted by Syndicate 4472 at Lloyd's of London (“the Insurer”) in the names of each of the owners of the Units (“the applicants”). The applicants each have the benefit of latent defects cover insurance policies under the Premier Guarantee Scheme of Insurance, and it is pursuant to those policies that the Insurer claims to be subrogated to the applicants' cause of action against the Companies. As the Insurer is taking steps to institute proceedings in the name of the applicants, I will refer to the moving parties as “the applicants,” save in relation to the objection based on subrogation, where I will refer to the moving party as Insurer, given that a consideration of the subrogation issue requires a consideration of the Insurer as such.
The draft plenary summons exhibited to the grounding affidavit claims damages for breach of contract, lease and/or covenant, and warranty, as well as damages for negligence, breach of duty (including breach of statutory duty), negligent misrepresentation, negligent misstatement and nuisance. An order for specific performance requiring the defendants to rectify and make good all defects in the premises known as the Spencer Dock Development (“the Development”), as well as related injunctive relief (including interim and interlocutory relief) are also claimed. The names of the 832 plaintiffs are scheduled to the plenary summons, along with their addresses within the development. The discrepancy between the number of intended plaintiffs and the number of apartments is explained by the obvious fact that some of the apartments are jointly owned.
The intended proceedings are related to two existing sets of proceedings, first, in proceedings issued on 15 May, 2018, and bearing High Court Record No. 2018/4336P (“the Management Company Proceedings”) the Management Company for the Development has already sued SDDC and others in relation to the alleged defects in the buildings comprising part of the Development. Furthermore, in proceedings bearing Record No. 2019/7612P (“the 2019 Proceedings”), the applicants have sued the various contractors and professionals who were involved in the design and construction of the buildings, and those proceedings relate to the same alleged defects. SDDC and Faxgore were not joined to those proceedings and it was apparently determined that, because they were both in liquidation, they would have to be sued in separate proceedings so as to accommodate the necessary application for leave pursuant to section 678.
SDDC and Faxgore were both the subject of winding up orders made 9 October, 2012. As regards SDDC, the Joint Official liquidators (“the liquidators”) formally advertised for proof of debt from 17 November, 2017 and formal adjudication took place on 19 January, 2018, with further adjudication on 31 January, 2018, under the supervision of the Examiner of the High Court. Although it is not on affidavit, I am told that the liquidation has since stalled, and I understand this to refer to SDDC only as Faxgore is not a party to the Management Company proceedings. There is no information on affidavit as to the progress or otherwise of Faxgore's liquidation.
Section 678 (1) of the Companies Act, 2014, provides:
“(1) When in relation to a company—
(a) a winding-up order has been made,
(b) a provisional liquidator has been appointed, or
(c) a resolution for voluntary winding up has been passed,
no action or proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose.”
It is agreed that this constitutes a re-enactment (with modification by way of inclusion of companies in voluntary liquidation) of s. 222 of the Companies Act, 1963, as amended, and that the authorities in relation to that provision are therefore relevant. However, the parties differ as to the correct approach to be taken to these applications. The applicants say that the authorities demonstrate that, if the cause of action could not more conveniently be dealt with in the winding up, and if there is a benefit to them in bringing the action or if they would be prejudiced if not permitted to sue, then leave ought to be granted. By contrast, the Liquidators say the discretion is broader and that the Court can consider, in addition to the matters identified by the applicants, a variety of factors in relating to the nature and circumstances of the proposed claim against the Companies in considering whether it is right and fair to permit the claim to be brought.
In the earliest of the authorities opened to me, Re MJBCH Ltd. (in liquidation) [2013] IEHC 256, [2013] 1 I.R. 407, Finlay-Geoghegan J., in considering the principal issue before her as to whether leave pursuant to s. 222 of the 1963 Act could be granted retrospectively in relation to existing proceedings, identified the purpose of s. 222 of the 1963 Act (at para. 17) as “ not simply the protection of creditors, but rather, primarily the purpose identified by Black L.J. in the Court of Appeal in Northern Ireland in Boyd v. Lee Guinness Ltd. [1963] N.I. 49, of placing all proceedings in relation to the company being wound up by the court under the supervision of the court.” She stressed, however, that the Irish section must be read in light of the constitutional right of access to the court. This emphasis on the constitutional right to bring an action to vindicate one's rights suggests that, unless there is real prejudice to the winding up of the company, as opposed to the inevitable disadvantage arising from being sued, leave should be granted pursuant to section 678.
To similar effect is the judgment of Laffoy J. in Wright-Morris v. IBRC (in special liquidation) [2014] 3 I.R. 468. That case concerned s. 6 of the Irish Bank Resolution Corporation Act, 2013, which provided that no further actions or proceedings could be issued against IBRC without the consent of the High Court. Although s. 10 (2) (c) of the 2013 Act specifically provided that s. 222 of the 1963 Act was not to apply to IBRC, it was conceded that the authorities on s. 222 of the 1963 Act were of assistance.
The judgment in MJBCH Ltd (in liquidation), which had been delivered only a short time before the hearing in Wright-Morris appears not to have been cited to Laffoy J. However, Laffoy J. took a remarkably similar approach to the application before her, leaning in favour of the right of the intended plaintiff in that application to pursue his proceedings, albeit that the case had additional considerations arising out of the fact that the proceedings were to be instituted in England and Wales. The intended proceedings in that case were based on an allegation that IBRC's predecessor had mis sold a “swap transaction” to the intended plaintiff in the United Kingdom. Relying on English authorities such as Re Exchange Securities & Commodities Ltd. [1983] BCLC. 186, which were to the effect that leave should be refused under the identical English statutory provision if the action proposed “raises issues which can conveniently be decided in the course of the winding up”, (para. 21), Laffoy J. granted leave, noting that IBRC's counsel had not contended that the proceedings in that case could be more conveniently dealt with in the special liquidation of IBRC.
In addition, Laffoy J. stated an application for leave could be refused where it would be futile to grant leave as, for example, where a claim would be clearly statute-barred, although that threshold was not met in that case. It is notable that Laffoy J. adopted that test from the principles applicable to the joinder of parties to existing proceedings.
That judgment was subsequently applied by Finlay-Geoghegan J. in Re Hibernation Therapeutics Global Ltd. (in liquidation) [2014] IEHC 41, where leave to continue part of an existing counterclaim comprising a complex dispute in relation to the ownership of the shares in the company could not “be conveniently determined in the course of the winding up proceedings” (para. 16)...
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